What is a business model?

A business model is the answer to:

Who pays, for what, why them, and how does money reach shareholders after costs?

If you can’t explain the model, skip valuation gymnastics.

The five-line template

1. Customer: who buys?
2. Offer: what do they buy?
3. Revenue: one-time, subscription, commission, interest, ads?
4. Costs: what must be spent to deliver?
5. Moat guess: why won’t a competitor erase this?

Examples of model families

• Consumer brand: sell products repeatedly through distribution
• IT services: sell people + process + delivery to enterprises
• Marketplace: take a cut of transactions
• Lender: earn spread on credit (with default risk)

Each family needs different “healthy” metrics. That is why sector articles exist.

Red flags in model storytelling

• Buzzwords with no cash path
• Revenue depends on one customer
• Related-party complexity you can’t map
• Growth that only works with endless new capital

Practice exercise

Pick any company and write half a page using the five-line template. If you stall, you are not ready for P/E debates yet.

Educational only.